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Do acquisitions affect IPO long-run performance? Evidence from single vs. multiple acquirers

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  • Amor, Salma Ben
  • Kooli, Maher

Abstract

Prior research does not consider the case of IPO firms making frequent acquisitions after going public and treat all transactions as a one-time deal. We distinguish between frequent and infrequent acquirers and find that the first deal of frequent acquirers does not negatively affect the long-run performance of initial public offerings (IPOs); however, the second deal does. We also find that frequent acquirers experience significantly poorer performance in the five years following the IPO. The cumulative average abnormal returns for one through four years based on industry, size, and book-to-market ratio matching method are −20.07% for frequent acquirers as compared to −6.22% for infrequent acquirers. Further, we find that frequent acquirers are less likely to survive in the five years following the IPO than single acquirers are. We confirm that investors are overoptimistic about the decision to acquire within the first year of going public.

Suggested Citation

  • Amor, Salma Ben & Kooli, Maher, 2016. "Do acquisitions affect IPO long-run performance? Evidence from single vs. multiple acquirers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 63-79.
    • Handle: RePEc:eee:intfin:v:40:y:2016:i:c:p:63-79
    DOI: 10.1016/j.intfin.2015.05.017
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    Cited by:

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    2. Mishra, Chandra S., 2023. "Does managerial ability drive frequent acquisitions? The role of strategic agency, firm innovativeness, and environmental uncertainty," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 861-873.
    3. Shaomeng Li & Guy S. Liu & Andros Gregoriou, 2021. "Do more mergers and acquisitions create value for shareholders?," Review of Quantitative Finance and Accounting, Springer, vol. 56(2), pages 755-787, February.
    4. Apostolos Dasilas & Chris Grose & Michael A. Talias, 2017. "Investigating the valuation effects of reverse takeovers: evidence from Europe," Review of Quantitative Finance and Accounting, Springer, vol. 49(4), pages 973-1004, November.
    5. Nguyen Van Tan & Ninh Thi Trang, 2023. "The long-run performance of initial public offerings: evidence from a transition economy," Afro-Asian Journal of Finance and Accounting, Inderscience Enterprises Ltd, vol. 13(5), pages 574-591.

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